An unthinkable way to charge ... but still in widespread use It really is unthinkable, isn’t it? I mean, what serious professional would charge you – according to your wealth? Your dentist? Your private surgeon? Your fitness instructor? Your accountant or solicitor? Your hairdresser – I don’t know much about these No, none of them but that’s exactly what many wealth managers and financial advisers do.
but again, that is more a supply and demand model - where drivers will tolerate a higher price, servos charge more - it is not like the servo charges marginally more where you buy more fuel. Cheers, Inertia.
The notion that fees are based on wealth is illogical really. And dentists are professionals who are impacted by market forces and health funds and piece rates for different items. The more you need the more it costs. Its like suggesting a better property shouldnt cost more than another because its more luxurious and in a better area. And using the inertia example above, you drive into a servo with a empty tank you pay per litre. Same price for each litre. You just bought more. Financial advisers dont charge according to wealth otherwise they would tally up the balance sheet and apply a uniform %, Charge for your property, super, shares , cash the lot. . They charge according to funds under management as its a good way to apportion total costs so a uniform approach occurs. We adjusted our fee down a few years ago as we looked at total client FUM and realised it wasnt fair on those with rising balances. So we adjusted all fees down proportionately to the total balances under management. Many then adjust this so the more you have the fee scales back. eg For over $500K its a lesser rate... And some offer capped fees, ceilings for fees and more. Many will quote a fee for service as that is precisely what a fee disclosure statement requires after the year...what did they get paid and what services did you use ? No matter how demanding or needy you are its a fixed fee. Fees should be linear for higher wealth v's small balances but small balances are a industry problem. The compliance burdens costs $XXX and so a small client buries you in costs before you can even be productive. So you cant discount them at all. But can scale back a large client maybe. Many people are shocked too when they do seek to understand what services cost. Comparing three different insurance policies and costs and benefits and then recommending the preferred one may take a while. And the fee based on a hourly rate could be significant. However if the insurer pays a upfront fee and the adviser takes that it may well be less than any fee the customer would pay - personally. And the insurer wont rebate it back as a lower premium. Many financial advisers rebate fees back to a agree fee for a service if it exceeds the work performed. Or they accept a lesser fee from the insurer and nothing more is said. I reckon hourly rates in the accounting profession are a poor way to quote. We endeavour to work to agred fees for services in place of saying a hourly rate. However when its really uncertain I can quote both. A time estimate and a fee per hour. I usually try to cap it of limit the upside to be fair. Clients have zero idea how long it will take. Its like selling carpet by the kilo instead of a measure you can understand like square metres. Lawyers have to provide a fee estimate the problem got so bad.
I get quotes via email, only mentioning the suburb. From blinds to building works, otherwise as soon as they walk in to "quote" and see the views the price is always far more........ Yes it happens
Hmm, we use a flat dollar fee structure for our ongoing service client's depending on what package they opt for, but I can see how this could be perceived if the ongoing fees were percentage based. Most times the bigger portfolio's require more work so the advice is more complex, comes down to whether you value the advice or not
